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Mid-America Apartment (MAA) Tops on Q4 FFO & Revenue Estimates

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported fourth-quarter 2022 core funds from operations (FFO) per share of $2.32, surpassing the Zacks Consensus Estimate of $2.28. The reported number improved by 22.1% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also issued its outlook for 2023.

Rental and other property revenues were nearly $528 million, outpacing the Zacks Consensus Estimate of $525.5 million. The reported figure was 13.9% higher than the previous-year quarter’s $463.6 million.

For the full-year 2022, the core FFO per share came in at $8.50, higher than the prior-year tally of $7.01 and also ahead of the Zacks Consensus Estimate of $8.46. This was backed by 13.6% growth in total revenues to $2.02 billion.

Per Eric Bolton, the chairman and chief executive officer of MAA, “We closed 2022 with better than expected results and carry good momentum into the new year. As the broader economy adjusts to a higher interest rate environment, we believe that MAA is well positioned to capture another year of solid performance from our existing portfolio. Supported by a strong balance sheet, the company is also in position to capture new growth opportunities that we believe are likely to emerge.”

Quarter in Detail

The same-store portfolio’s revenues grew 13.6% on a year-over-year basis due to a rise of 14.9% in the average effective rent per unit.

However, the average physical occupancy for the same-store portfolio in the fourth quarter declined by 40 basis points year over year to 95.6%. The resident turnover for the same period was 46.1%. Same-store portfolio operating expenses flared up 7.9%.

For leases effective during the fourth quarter compared to the prior lease, same-store portfolio lease pricing increased 2.2% for leases to new move-in residents. This mirrored usually slower seasonal leasing volumes. For renewing leases, the same increased 10.1%. On a blended basis, this resulted in growth of 5.7% for new and renewing leases.

Moreover, the same-store net operating income (NOI) reflected year-over-year growth of 16.8%.

Balance Sheet Position

MAA exited the fourth quarter of 2022 with cash and cash equivalents of nearly $38.66 million, down from the $54.3 million reported at the end of 2021.

As of Dec 31, 2022, MAA had a strong balance sheet with $1.3 billion in combined cash and capacity available under its unsecured revolving credit facility. Also, it had a historically low Net Debt/Adjusted EBITDAre ratio of 3.71.

As of the same date, the total debt outstanding was $4.4 billion. Its total debt average years to maturity was 7.9 years. As of Dec 31, 2022, unencumbered NOI was 95.2% of the total NOI.

Portfolio Activity

In the fourth quarter, MAA redeveloped 1,327 apartment homes. Meanwhile, Smart Home technology installations were completed in 2,921 units.

As of Dec 31, 2022, MAA had six communities under development, with a total projected cost of $728.7 million and an estimated $437.0 million remaining to be funded. The projected average stabilized NOI yield is 5.6% for the same.

In the fourth quarter, MAA closed the pre-purchase of a multifamily community in the Charlotte, NC market, with development expected to begin in the second half of 2023. Also, MAA acquired a six-acre land parcel in the Raleigh, NC market for around $9 million. It commenced the development of MAA Nixie on the property.

In the fourth quarter, MAA disposed of a 396-unit multifamily community in Maryland and a 288-unit multifamily community in the Austin, TX market for total gross proceeds of $157.7 million. This helped reap gains on the sale of depreciable real estate assets of $82.8 million.

Guidance

MAA issued its 2022 guidance. This residential REIT estimates the 2023 core FFO per share in the range of $8.88-$9.28, with a midpoint of $9.08. The Zacks Consensus Estimate for the same is currently pegged at $9.16.

For 2023, management anticipates same-store property revenue growth of 5.25-7.25%, and operating expense growth is projected between 5.15% and 7.15%. As a result, the same-store NOI growth is anticipated between 5.30% and 7.30%. Average physical occupancy for the same-store portfolio is guided in the range of 95.6-96.0%.

MAA projects first-quarter 2023 core FFO per share in the band of $2.14-$2.30, with $2.22 at the midpoint. The Zacks Consensus Estimate for the same is currently pegged at $2.25.

MAA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise
Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise

Mid-America Apartment Communities, Inc. price-consensus-eps-surprise-chart | Mid-America Apartment Communities, Inc. Quote

Upcoming Earnings Releases

We now look forward to the earnings releases of other residential REITs like UDR, Inc. UDR, Essex Property Trust, Inc. ESS and AvalonBay Communities, Inc. AVB. While UDR is slated to report on Feb 6 and Essex Property Trust on Feb 7, AvalonBay Communities is scheduled to come up with its results on Feb 8.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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